Faced with sluggish growth realty companies selling land to peers

Faced with sluggish growth, some large real estate companies in India have started selling parts of their licensed land in township projects to raise funds and speed up project execution.

NEW DELHI: Faced with sluggish growth, some large real estate companies in India have started selling parts of their licensed land in township projects to raise funds and speed up project execution.

The Jaypee group, for instance, recently sold floor space index (FSI) covering 300 acres of licensed land on the Yamuna Expressway to Gaursons India, another developer, for about 1,600 crore. Gaursons now plans to sell smaller FSIs on this plot to local builders, persons with knowledge of the matter said.

"The market is certainly slow and this will help us improve demand," said Manoj Gaur, managing director of Gaursons, which had earlier sold similar floor space index in its Noida Extension project to smaller builders.

Similarly, the Vatika group recently sold 2.2 million sq ft of residential FSI at its 300-acre township in Gurgaon to three developers-ATS, Ashiana and Assotech.

"A few builders together developing a large township will improve the speed of execution and will create variety and healthy competition in the area," said Gautam Bhalla, managing director of Vatika.

Large township projects generally take eight to 10 years for completion, but the pace of execution, at least of the residential portions, can be quickened if more than one developer works on it. With multiple partners in place, these developers are hoping to complete such 100 to 300 acre projects in five to seven years.

"People are selling FSIs for financial reasons of course, but also to clean out their portfolio from a strategic fit perspective," said Anckur Srivasttava, chairman of GenReal Property Advisers, a real estate consulting firm involved in some such transactions.

Noida-based Assotech, which bought 10.5 acres in Gurgaon from Vatika, paid around 175 crore for the land that came with all approvals for a group housing. "With a few developers now working within this township, it will show the buyers that there is enough activity happening here, something that could improve demand for sure," said Sanjeev Srivastva, managing director of Assotech.

Other such transactions that have happened in Gurgaon and Noida include Indiabulls Real Estate selling 10 acres to the Paras group for about 200 crore and Orris selling 100 acres to ATS in its township on the Yamuna Expressway.

"It's a large township and how much can we build alone. We wanted to get in a partner who can add value and also speed up development of the area," said Amit Gupta, managing director of Orris.